Growth and Development in Bangladesh I A-Level, AP & IB Economics

Summary

Bangladesh, a rapidly growing economy, has made impressive progress since its independence over 50 years ago, achieving 6% annual growth since the 2000s. The country, once among the poorest, now aims to achieve upper-middle-income status by 2031 and high-income status by 2041. While it faces challenges like corruption, low labor productivity, and vulnerability to climate change, Bangladesh's textile industry plays a pivotal role in its growth. With a young population and rising remittances, Bangladesh's export-driven growth is paired with a growing domestic market, though its economy remains highly dependent on the textile sector.

Takeaways

• 😀 Bangladesh has achieved remarkable economic progress, with an annual growth rate of around 6% since the 2000s, making it one of the fastest-growing economies in the world.
• 😀 In the early 1970s, Bangladesh was one of the poorest countries globally, with a per capita income of just $95 and life expectancy of 46.5 years. Now, the life expectancy has increased to 72 years.
• 😀 The country is on track to graduate from least developed country status and aims to reach upper-middle-income status by 2031 and high-income status by 2041.
• 😀 Bangladesh's economy has grown even during the pandemic year of 2020, which demonstrates its resilience amidst global economic downturns.
• 😀 The share of Bangladesh's global GDP (purchasing power parity) is expected to rise above 1% in the coming years, joining the group of countries that contribute more than 1% to world GDP.
• 😀 Key development progress includes improvements in life expectancy, poverty reduction, and increased secondary education completion rates, with secondary education completion rising from 54% in 2000 to 82% today.
• 😀 Bangladesh still faces challenges, such as high corruption (ranked 149th on the Corruption Perceptions Index) and gaps in social and economic development.
• 😀 A significant portion of the economy is dependent on textiles, with Bangladesh being the world’s second-largest exporter of garments, employing over 4 million people in this sector.
• 😀 Despite strong growth in manufacturing, the textile sector’s low value-added nature and reliance on imported cotton pose risks to long-term sustainability.
• 😀 Bangladesh's economy is highly vulnerable to climate change, with frequent flooding, cyclones, and rising sea levels, making climate adaptation and infrastructure a critical challenge for future growth.
• 😀 The country faces challenges in improving labor productivity, with a skills mismatch holding back living standards and foreign direct investment (FDI) being relatively low compared to countries like Vietnam.

Q & A

What makes Bangladesh's economy unique in recent years?

Bangladesh's economy has been one of the fastest growing in the world, achieving annual growth of around 6% per year since the 2000s. This growth, alongside significant population growth, has lifted per capita incomes, positioning the country as a remarkable success story in global economic development.

How has Bangladesh's development progressed over the years?

Bangladesh has made substantial progress since gaining independence, moving from one of the poorest countries in the 1970s with a per capita income of just $95, to a GDP per capita of over $25,000 in 2022. Life expectancy has also increased from 46.5 years in the 1970s to 72 years now.

What is Bangladesh's current economic growth forecast?

The growth rate for Bangladesh has remained strong, even during the pandemic year of 2020, with the country managing to avoid a recession. Forecasts suggest that by the next few years, Bangladesh will surpass 1% of global GDP, joining a select group of fast-growing economies.

What are the key challenges Bangladesh faces in its development?

Despite strong growth, Bangladesh faces significant challenges such as high corruption levels, gaps in socioeconomic development, and vulnerability to climate change, particularly flooding and cyclones. Sustainable growth, job creation, and economic diversification are also major concerns.

What is the significance of Bangladesh's textile industry?

The textile industry is a primary driver of Bangladesh's economy, accounting for about 30-33% of GDP. In 2022, Bangladesh manufactured 1/5th of the world's exported cotton t-shirts. The sector employs over 4 million people and plays a key role in the country's export growth.

How has Bangladesh’s manufacturing sector evolved?

Bangladesh has seen a structural transformation, with agriculture's contribution to GDP falling from 17% in 2012 to about 11%. Manufacturing, particularly textiles and pharmaceuticals, now accounts for over 30% of GDP, signaling a shift towards industrialization.

What role do remittances play in Bangladesh’s economy?

Remittances are a significant part of Bangladesh’s economy, contributing around 4.5% of GDP in 2022. The country received over $21 billion in remittances, underscoring the importance of outward migration and the financial support it provides to households.

What demographic advantage does Bangladesh have?

Bangladesh has a young population with a median age that provides a demographic 'sweet spot.' Despite some outward migration, the country’s young workforce is a potential driver of economic growth, provided job creation and economic diversification are successfully managed.

What are some of the limitations to Bangladesh’s economic growth?

Bangladesh faces several limitations, including over-dependence on the textile sector, low investment in research and development (R&D), low labor productivity, and a relatively low tax-to-GDP ratio. Furthermore, the country is highly vulnerable to climate change, which poses a major risk to its future stability.

How does Bangladesh's vulnerability to climate change affect its economy?

Bangladesh is one of the most vulnerable countries to climate change, particularly with frequent flooding, tropical storms, and cyclones. Its low-lying geography and inadequate flood protection infrastructure make it highly susceptible to climate-related disasters, which could undermine development progress.